HMO Licensing Schemes: Effective or Exploitative? An Ongoing Debate
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by Paul Conway
Paul is the founder and CEO at Yuno, a compliance platform that helps landlords, property investors and estate agents navigate their responsibilities and liabilities in the UK's property market.
A recent study, highlighting the controversial topic of property licensing schemes and their impact on landlords, agents, and the rental sector, has been released through a collaboration between the compliance platform Yuno and industry expert Kate Faulkner OBE.
As a result, the effectiveness and cost-justification of these schemes are being called into question.
The Case Against Licensing Schemes
Property licensing schemes, such as selective licensing and additional HMO (House in Multiple Occupation) licensing, are implemented by local councils to enforce higher standards in the private rented sector.
However, the study reveals that only a quarter of English local authorities and a third of Welsh authorities have adopted these schemes. Despite this limited reach, the fees charged to comply with these schemes are substantial, often costing landlords and agents upwards of £1,000.
One of the key criticisms of these schemes is their uneven distribution across regions.
Yuno's analysis highlights that the regions with a higher proportion of non-decent homes tend to have fewer licensing schemes in place, while regions with better housing standards, such as London, have a higher concentration of schemes. This raises doubts about the direct impact of licensing on housing standards.
Furthermore, the report exposes discrepancies in licensing fees, with some London councils charging fees up to 200% higher than others for identical licenses. This lack of uniformity suggests that the cost of these schemes may not be reflective of their actual value or effectiveness in improving rental housing standards.
The Argument for Regulation
While the report questions the efficacy of property licensing schemes, it is important to acknowledge the improvements in private rented homes across England and Wales.
Councils and campaign groups often champion licensing schemes as a necessary measure to hold landlords accountable and ensure safe and decent living conditions for tenants.
The goal of selective licensing, in particular, is to target areas of low housing demand, high levels of deprivation and poor housing conditions.
By requiring landlords to obtain a license, councils can set and enforce minimum standards for properties, potentially improving the lives of tenants and the reputation of the rental sector as a whole.
A Call for Evaluation
The timing of Yuno's research is significant, as the Government's proposed national landlord portal within the Renters (Reform) Bill could render selective licensing schemes redundant.
This report is therefore part of a timely discussion on the role and effectiveness of these costly schemes.
Yuno is organising a roundtable on the 25th of April 2024 to delve deeper into this contentious issue and evaluate whether these expensive licensing schemes are delivering on their promise to raise housing standards. With the participation of industry experts and stakeholders, the roundtable aims to provide insights and recommendations for a more efficient and equitable approach to regulating the rental sector.
As the debate around property licensing schemes intensifies, it is clear that a comprehensive evaluation of their impact is long overdue. While the goal of improving rental housing standards is universally supported, the methods by which this is achieved must be fair, effective, and proportionate for all involved.
Key Facts
- 25% of English local authorities and 36% of Welsh authorities enforce Additional HMO and/or Selective Licensing schemes.
- Discrepancies in licensing fees exist, with some councils charging significantly more than others for the same licenses.
- The Government's proposed national landlord portal may make selective licensing schemes unnecessary.
- Yuno's analysis questions the link between licensing schemes and improved housing standards, particularly in regions with higher proportions of non-decent homes.